Strength in Emerging Markets and the Favored Trade
For much of last year, infatuation with the so-called FANG stocks and their fate, seemed to guide market action. Valuations approaching a trillion dollars and individual weights approaching 4% of the S&P 500 index marked the highs for the FANG stocks and the broader market as well. After a record setting sell off and rally in the past 2 months, investors might ask as to where and what markets might be leading.
A monthly survey from Bank of America shows emerging markets to be the “most crowded” trade. This designation suggests a closer look might be in order.
Source: Bank of America
While perennially showing up on GMO’s asset class list as a favored and undervalued area, emerging markets have disappointed investors for many years. Strength may finally be emerging.
Many foreign and emerging market stocks have shown strength versus the US markets in recent months, if the dollar where to weaken, historical relationships suggest this strength could increase.
Headwinds for US Global Banks
Fees from asset management have been a coveted component of the US global bank business model. Competition and markets that don’t going perpetually upwards might be challenging in markets where the product offered is increasingly commoditized.
Source: Wall Street Journal
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